What the papers say - 10th December 2008

Published 11/12/2008

The front page of today’s Daily Express revealed that rock-bottom interest rates have forced mortgage costs down to their lowest level for two years- and even cheaper deals are on the way. According to figures from the Bank of England the average tracker mortgage rate dropped 1.5 per cent to 5.84 per cent at the end of November, down from 7.04 in October. Furthermore, two-year fixed-rate deals for new borrowers with a 25 per cent deposit also fell from 5.82 per cent to 5.11 per cent, their lowest level since September 2006. Despite these encouraging statistics, the paper explained that borrowers with small amounts of equity in their homes are still being penalised with inflated mortgage rates, because lenders remain unwilling to approve riskier loans. The Daily Mail suggested that homeowners who have locked their mortgage repayments for more than two years may be better off paying hefty early exit penalties and swapping to one of the new cheap deals being launched. The London & Country website has a calculator that lets you enter your current loan size, and redemption charge. It will then work out what rate you would need to make a saving over the remaining term.

Finally, the Daily Mirror had a piece that asked why lenders still won’t trade with rivals, are failing to pass on rate cuts and have slashed savings rates. In addition, the average new buyer needs a 17 per cent deposit- the highest since 1980.

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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Representative example A mortgage of £188,578 payable over 22 years, initially on a fixed rate until 31/12/23 at 2.19% and then on a variable rate of 4.74% for the remaining 17 years would require 62 payments of £900.79 and 202 payments of £1,094.12. The total amount payable would be £276,994 made up of the loan amount plus interest (£88,283) and fees (£133). The overall cost for comparison is 3.7% APRC representative.

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